"Spending Clause legislation like Medicaid 'is much in the nature of a contract,'" wrote Justice Antonin Scalia, speaking for himself and justices Stephen Breyer, Clarence Thomas, Samuel Alito, and Chief Justice John Roberts in the 5-4 decision. "The notion that respondents have a right to sue derives, perhaps, from the fact that they are beneficiaries of the federal-state Medicaid agreement and that intended beneficiaries, in modern times at least, can sue to enforce the obligations of private contracting parties.

"We doubt, to begin with, that providers are intended beneficiaries (as opposed to mere incidental beneficiaries) of the Medicaid agreement, which was concluded for the benefit of the infirm whom the providers were to serve, rather than for the benefit of the providers themselves. ... More fundamentally, however, the modern jurisprudence permitting intended beneficiaries to sue does not generally apply to contracts between a private party and the government -- much less to contracts between two governments."

The case Armstrong et al. v. Exceptional Child Center Inc. involved a group of child care centers specializing in children with intellectual and developmental disabilities. The centers sued the state of Idaho, claiming that it reimbursed them at rates lower than allowed by Medicaid law. The district court ruled in favor of the centers, and the appeals court agreed with that decision.

Justice Sonya Sotomayor, writing for herself and justices Ruth Bader Ginsburg, Anthony Kennedy, and Elena Kagan, disagreed with Tuesday's decision, noting that the Supreme Court "has adjudicated such requests for equitable relief since the early days of the Republic. Nevertheless, today the Court holds that Congress has foreclosed private parties from invoking the equitable powers of the federal courts to require States to comply" with a Medicaid law regarding reasonable reimbursement.

"The Court relies on Congress' provision for agency enforcement of [this law] -- an enforcement mechanism of the sort we have already definitively determined not to foreclose private actions -- and on the mere fact that [the law] contains relatively broad language," Sotomayor wrote. "As I cannot agree that these statutory provisions demonstrate the requisite congressional intent to restrict the equitable authority of the federal courts, I respectfully dissent."

Opinions on the effect of the ruling were mixed. "This decision further reinforces a long-running trend toward ever-lower Medicaid reimbursement that, at some point, will reach a level that is untenable," Dan Ehlke, PhD, assistant professor of health policy and management at SUNY-Downstate Medical Center School of Public Health, in New York City, told MedPage Today in an email.

"Here in New York, it is already difficult for beneficiaries to find providers willing to accept Medicaid, and that is something we're likely to see far more of in cities and states across the country," he continued. "At what point, then, does the 'promise' of a Medicaid benefit cease to translate into anything particularly concrete? It runs the risk of becoming a program that does just enough to salve the conscience of those politicians who wish to claim they're looking out for the interests of the poor, without actually doing much in that capacity."

A study released Tuesday by the National Center for Health Statistics found that roughly one-third of physicians were refusing to accept new Medicaid patients, while nearly 85% would accept new privately insured patients.

David Howard, PhD, professor of health policy and management at the Rollins School of Public Health at Emory University in Atlanta, said in an email that regardless of the decision, "States will continue to squeeze provider reimbursements. The Department of Health and Human Services will have to fulfill its obligation to ensure that Medicaid beneficiaries have adequate access to care."

And, he added, "The courts are not a good venue for addressing the complex issues surrounding Medicaid reimbursement levels."

Michael Morrisey, PhD, professor in the department of health policy and management at Texas A&M University in College Station, said he didn't think the decision would have much practical effect. "Providers can enter into contracts with Medicaid that include payment rates. To the extent that those payments don't cover at least marginal costs, providers choose not to participate," he wrote in an email.

"Indeed, many providers have chosen not to participate under current rates. While providers undoubtedly would have liked the ability to sue over inadequate rates, I suspect that the vast majority who thought the rates inadequate had already minimized their Medicaid exposure."

Will the decision have any effect on states that have not yet expanded Medicaid coverage, as they have the option of doing under the Affordable Care Act? Possibly, Ehlke said.

"It could lead a few governors currently on the fence to open the door to a Medicaid expansion, given the green light to low reimbursement rates. However, some state policymakers could make the opposite decision, on the basis of such an expansion making little practical difference."

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